This may be done by using your spare income, a lump sum or other assets you own. If you have surplus income after paying your essential household and personal expenses, (before paying any credit cards and loans etc) then an agreed amount can be paid each month to an Insolvency Practitioner who will then distribute funds to your creditors.

Alternatively, a lump sum payment can be offered to creditors in settlement of your debt. Creditors will be asked whether they will accept the proposed return which is usually a percentage of what is owed and then the Arrangement will last for usually five years.

Once an Arrangement has been accepted by creditors, no further interest can be added to your debts and your creditors are bound by the terms of the Arrangement and may not seek payment from you.

The Insolvency Practitioner’s fees for an Individual Voluntary Arrangement are taken from the funds you pay and are agreed by creditors. Therefore, there are no further fees on top of the agreed monthly payment or lump sum.

Once you have successfully completed an IVA, you are considered as debt free. Your credit rating is affected for approximately six years from when the IVA was taken out.